How to protect your money if a yacht dealer goes under
In response to my blog piece on the demise of BA Peters and holding stage payments in an escrow account, broker David de Vere emailed with his views:
‘The requirements of the Yacht Brokers, Designers and Surveyors Assocation concerning customers’ brokerage boat deposits is that they should be placed in a closed clients account where they should remain until the sale completes. At this time the vendor is paid the proceeds of the sale and the balance left over (commission, etc) is then transferred to the brokers normal accounts.
‘However, this only applies to brokerage boats. There is no requirement to keep customers’ deposits in a closed account for new build, stock new or used dealer owned boats that the dealer might be selling.
‘Yes customers can request that any monies paid in advance are placed in an escrow account, but the adminstration costs involved in this are quite high and customers for boats in particular do not like paying the rate for the job!
‘In addition it should be pointed out that manufacturers require deposits on new build boats which are normally funded out of customer new boat deposits. If the manufacturer was to go broke, the dealer would loose the deposit paid but the customer’s deposit would still be safe.
‘In this case only the dealer would loose out. However, if all the deposit were tied up in escrow accounts, major cash flow problems would occur with a lot of companies and the systems would just tie up.
‘In essence therefore, if every single new boat customer demanded that his payments in advance were kept in a closed account, the dealers’ costs would increase quite considerably. This cost would have to be passed onto the customer by way of increasing boat sales prices.
‘There is one other option called a new build contract, where effectively the customer pays progress payments through the dealer direct to the manufacturer. However, this is very outdated and extremely difficult to police.
‘If the manufacturer goes broke – nine times out of ten whilst the customers may rightly claim that the part complete boat X in the production line is his – there are also numerous other suppliers such as the engine manufacturer claiming that because the engines have not been paid for – they are still his etc. Also most major production line boatbuilders would not accept a new build contract.
In the case of BA Peters, I would suspect that the client account holds brokerage sales deposits/payments only. Other deposit, like all the suppliers debts, I am afraid go into that big bad melting pot called receivership.
In this big bad commercial world, I am afraid every now and then, customers suffer because of a supplier, insurance company or whatever going under. Fortunately in this industry it does not happen that often. Quite often it is the dealer who is protecting the customer from others going under.’